By TIOL News Service

MUMBAI, MAY 13, 2014: THERE are a total of seven appeals disposed by the Tribunal in this case.

Four appeals are by the assessee and three by the Revenue.

The assessee is engaged in providing various services which includes Security services, House Keeping Services, Fire Fighting Services, Utility Services, Customer care Services, Liftmen Service, Attendants, gardening, receptionist, management facilities, Cleaning services etc.

The first appeal by assessee:

Investigation by the department extended to around 422 clients/customers of the appellant. After recording statement of 22 customers and procuring various documents from the 422 customers, as also documents recovered during the searches at the appellant/assessee premises, a demand notice amounting to Rs.2,04,62,708/- was issued on 21.4.2006 covering the extended period 1.2.2001 to 30.9.2004. The case was adjudicated by the CST, Mumbai-II who confirmed the demand and imposed equivalent penalty etc.

It is submitted by the appellant assessee that the statement of only 22 clients of the appellant were recorded while in respect of the remaining 400, evidence in the form of only documents were available; that the documents in respect of said 422 clients were not given to them before passing the impugned order; these documents were made available to them only on 27.4.2011 i.e. after passing of the impugned order; many of these documents indicate that the services were non-security services; department is relying on the Minutes of the meeting held by the appellant /assessee with various officials of their establishments in different parts of the country - that these Minutes are not signed by any one and, therefore, cannot be relied - that the minutes are of January 2004 while the period of dispute is from 2001 - that the demand raised also includes the amount received by them from ONGC which were arrears of the services provided by them for earlier period.

The Special counsel for the Revenue submitted - these documents are their own documents which have been procured by the Revenue from appellant's clients; as far as the minutes of the meetings are concerned it is irrelevant whether these are signed or not; content of the minutes is of a nature which would be applicable even for the earlier period; in view of the fact that the appellant has not correctly indicated the value of the service provided to their clients or in some cases even though security services were provided but no tax was paid indicate clear cut suppression of facts with willful intention to evade payment of duty and extended period have been correctly invoked; components to be included in valuation of the security service is well settled in Punjab Ex-Servicemen Corporation Vs. CCE, Chandigarh - 2006-TIOL-1488-CESTAT-DEL; GDA Security Pvt. Ltd. Vs. Union of India - 2003-TIOL-122-HC-MAD-ST; the fact that the ONGC is not paying service tax to them cannot be a reason not to collect the tax from the appellant.

The Bench observed -

+ There was a gap of five years between the issuance of the demand notice and adjudication of the case. During this entire period no such claim or demand about the documents was ever made; as per their own admission the copies of the documents have been received by them on 27.4.2011; In any case, even after receipt of the document, no meaningful case has been made before us so as to indicate that the conclusion reached in the impugned order will be amended.

+ Primarily these documents only indicate the correct invoice or the details of payment/charged made by appellant from their customer for the services. What has been shown by the appellant in the ST-3 returns and consequent service tax paid to the Government Exchequer is different; therefore no merit in the contention of the appellant.

+ There is no need to record the statement of all the customers when the details are evident from the documents submitted by them. Appellant is not disputing the details given in the documents.

+ Valuation of security service is settled by Tribunal in cited decisions. Section 67 of the Finance Act, 1994 provides that for service tax purpose, gross amount charged will be the value. It is not in dispute that all the security guards were on the pay role of the appellant and various charges relating to provident fund, ESIC etc. were charged from their clients.

+ As far as amounts received from ONGC is concerned, the fact that ONGC is not paying service tax to the appellant is of no consequence. As long as the appellant is providing the security service to ONGC, appellant is required to pay the said amount to the Government.

+ Contention that some amount received from ONGC was relating to arrears, however, no details have been produced.

+ Appellant was not declaring the value of the service correctly. It was based upon the painstaking exercise done by the Revenue covering 422 customers that the correct value of the services and the amount of service tax have been computed. This is a clear cut case of suppression of facts with willful intention to evade payment of duty. ST-3 returns field during the period did not reflect the correct position, therefore, extended period of limitation is invokable in the facts and circumstances of the case and penalty under Section 78 of the Act is also imposable.

Appeal dismissed.

Three appeals by Revenue:

The first SCN invoked the extended period of limitation and the other twoconcerned the normal period. The adjudicating authority held that extended period is not available in respect of the first SCN dated 23.04.2010 covering period October 2004 to March 2009.

The Adjudicating authority found that there was no change in the nature of various services provided by the appellants during 2001-2011 and department has already issued demand notice on 21.4.2006 invoking extended period of limitation for the period April 2001 to September 2004 and hence second demand notice invoking extended period was not maintainable in law.

The Tribunal held -

+ In the facts and circumstances particularly when all the activities were informed, detailed investigation had taken place and another show cause notice invoking extended period was already issued, one cannot justify invocation of extended period on this ground.

+ We do not find anything in demand notices or the appeal before us which suggest that department has fulfilled its initial burden to prove that the situations visualized by the proviso existed. In our view, Commissioner is correct in holding that in view of Hon'ble Supreme Court's Decision in the case of Nizam Sugar Factory - 2006-TIOL-56-SC-CX, extended period of limitation cannot be invoked in the present facts and circumstances. We also note that Hon'ble Supreme Court decision in the case of Chemphar Drugs Liniments - 2002-TIOL-266-SC-CX is fully applicable in the present circumstances.

+ We also note that even while filing appeal before this Tribunal, Revenue have not commented on various documents invoices/agreements etc. produced before the adjudicating authority. The findings of the adjudicating authority are not being disputed on such analysis, but is based upon the bald assertion that the adjudicating authority has failed to take into consideration the various documentary evidences like contract which were available before him to correctly determine the classification of service rendered by the appellant. If the Revenue would have detailed in appeal/demand notices, the same would have helped this Tribunal to appreciate if the findings of the adjudicating authority are indeed incorrect.

Holding that there is no strength in the appeals filed by the Revenue the same were dismissed.

Three appeals filed by assessee:

These appeals have been filed against the impugned order dt. 31.1.2011 wherein there is:

(i) Confirmation of demand of Rs.47,87,874/- in respect of the security services provided to ONGC.

(ii) Confirmation of demand of Rs.1,48,40,932/- in respect of reimbursement/compensation received by the appellant/assessee in respect of the taxable services.

(iii) Confirmation of demand of Rs.3,59,53,895/- in respect of the cleaning services.

Submissions made:

After the introduction of the service tax on security services appellant have been trying to persuade ONGC to bear the burden of service tax. However, ONGC has refused to pay them the service tax. That they had gone to the Bombay High Court and the matter is pending. Their contention is that as soon as matter will be sorted out and they receive the service tax amount from the ONGC, they undertake to pay the same to the department.

Contribution to EPF, ESIC and the salary of the security personnel cannot form part of the assessable value as these charges are nothing but reimbursement of the actual expenditure done by them.

As far as confirmation of the demand in respect of Cleaning Activity Service is concerned, it is submitted that the three demand notices issued by the Revenue are not for Cleaning Activity services but these demand notices were issued for Manpower Supply Service. Since the demand notices were not for cleaning service, it was incorrect on the part by the adjudicating authority to confirm the demand under the Cleaning Activity service.

The Bench held;

+ In the case of security services it is not disputed that payments like salary of the security guards, provident fund, ESIC etc. are being collected/charged by the appellant/assessee from their customers. The said amount is being recovered by the appellant/assessee from the service receiver in addition to their own service charges. Under the circumstances we have no hesitation in holding that the said amount will form part of the assessable value as has been consistently held by this Tribunal in large number of judgements including that of Punjab Ex-Servicemen Corporation (supra). Even after the introduction of Service Tax (determination of Value) Rules 2006 these reimbursements cannot be considered as pertaining to reimbursement as a pure agent as security guard is integral part of service and all charges pertaining to him will form part of the value. These do not satisfy the conditions of pure agent.

+ The fact that ONGC is not paying to the appellant/assessee will not make any difference as far as appellant/assessee's liability to pay the service tax to the Government is concerned. The fact that ONGC is not paying to them is a matter between the appellant/assessee and ONGC. We, therefore, hold that appellant is liable to pay the service tax as the services provided to ONGC and on the gross amount including salary, EPC, ESIC etc.

+ As far as the issue relating to cleaning activity services is concerned, appellant/assessee are not disputing that they were providing Cleaning Activity service which is chargeable to service tax. In fact during the hearing before adjudicating authority they have agreed to the same and also offered voluntarily to pay the same in respect of the Cleaning Activity services provided to commercial and industrial organization. Having volunteered to pay the service tax on the cleaning activity service which in any case they were liable to pay, we do not see any substance in the appeal filed by the appellant/assessee.

+ It may be true that the demand notices did not speak of the cleaning service or demanded the service tax but same was demanded as Manpower Recruitment and Supply Service, but the fact remains the appellant/assessee was aware of the same, has provided the same service, is not disputing the taxability of the said service and therefore, at this stage appellant/assessee cannot be permitted to go back on his words. Even the payments made by the appellant/assessee were voluntarily and cannot be considered under duress as the payments were made after the adjudicating order was passed and before the appeals were filed before this Tribunal. We also note that initially they did not file appeals in respect of Cleaning Activity service and service tax relating to reimbursement/compensation of expenses. It is only when they came to know of the appeals filed by Revenue, that they amended their appeals by disputing the said payments.

The aforesaid three appeals filed by the assessee were dismissed.

Conclusion:

All the four appeals filed by the appellant/assessee and three appeals filed by Revenue are dismissed.

In passing : Perhaps in the days to come, we will get to hear more about this case.

(See 2014-TIOL-755-CESTAT-MUM )